An estimated 125,000 Californians who are struggling with risky mortgages from Countrywide Financial Corp. may get their loans modified and payments reduced under a program to be announced today.
In a pact that could save mortgage holders billions of dollars, Countrywide owner Bank of America Corp. has agreed to the nation's largest loan-modification program to settle charges of lending abuse brought by California and other states.
The program could reduce payments to Countrywide borrowers and provide other benefits to total as much as $8.7 billion nationwide. It would examine nearly 400,000 loans across the nation -- about 125,000 of them in California -- to see how they could be reworked and made more affordable. That could include switching customers to fixed-rate loans or reducing the interest or principal.
Bank of America said Countrywide mortgage-servicing employees would be trained to carry out the program by Dec. 1 and would then begin reaching out to eligible customers. The plan includes a foreclosure freeze for borrowers who are likely to qualify until Countrywide has determined their eligibility, the bank said.
But officials acknowledged that some borrowers were beyond help and said these customers would need the cooperation of investors who owned the loans. Such assistance was not always forthcoming in the past.
The settlement includes a program for California borrowers who are behind on their Countrywide mortgage payments or are having their homes foreclosed by the lender.
The total value of the benefits could reach $3.5 billion to California homeowners who took out risky, adjustable-rate loans from Countrywide, California Atty. Gen. Jerry Brown said.
The program, to be announced today by Brown, applies to mortgages made before this year. It had been endorsed by at least nine states as of Sunday, including California, Florida and Texas, where Countrywide wrote the most loans.
Its central thrust -- changing the terms of subprime and other risky loans -- was to be applied across the country, even in states that might not accept the overall settlement, California and Bank of America officials said.
"It's not perfect," Brown said Sunday, "but we have some money for people who already have been kicked out of their homes, and we have money for people who may get foreclosed on later. And there are some very significant payment reductions for people. This will allow them to stay in their homes."
